HOUSTON-Pinchal & Co. has decided to sell off a 27-building industrial portfolio totaling 7.65 million square feet. Located in nine states across the Midwest and Southeast, the portfolio is expected to fetch $350 million.
“This portfolio of class A industrial buildings is an opportunity to acquire core facilities at well below replacement cost,” says John Huguenard, head of national industrial investment sales and managing director for Jones Lang LaSalle. He and Peter Harwood, senior vice president of Jones Lang LaSalle, have been hired to market the portfolio. Mike Melody, co-head of real estate investment banking for Jones Lang LaSalle, and Jimmy Board, senior vice president of Jones Lang LaSalle, will provide debt assistance.
Replacement value for similar assets would be roughly $50 per square foot, Huguenard tells GlobeSt.com That translates to an overall replacement cost of nearly $383 million.
The buildings are located primarily in secondary cities in Georgia, Indiana, Illinois, Michigan, North Carolina, Ohio, South Carolina and Tennessee. “We’ve found that these markets don’t have as much speculative development during the good times, therefore occupancy rates are a little higher,” Huguenard notes. “Rents have bounced back in the second tier markets more than first tier markets.”
Built from the mid-1990s to 2008, the portfolio is more than 97% occupied and is leased to 45 high-quality tenants, the majority of which are publicly traded or credit-rated companies. Just over 66% of the assets are single tenant, while the remainder of the properties is multi-tenant buildings.
The average remaining lease term is five years and about 30.5% of the portfolio has long-term leases that expire between 2022 and 2027. The portfolio offers below-market in-place rents.
“One of the keys for investors is whether rents have been rolled back to market rather than inflated rents of 2005 and 2006,” Huguenard notes. “These have already been renewed and rolled back to market.”
Pinchal routinely sells off industrial portfolios that it has amassed through one-off acquisitions. However, the local company has not brought a portfolio to market since 2005, Huguenard notes. “Pinchal is picking a very good time to go out to the market given the demand from investors and availability of capital for industrial assets,” he contends. He estimates the property will trade at a cap rate in the 7% range, depending on the price of the debt.
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